Standing Committee E

[Mr. Alan Hurst in the Chair]

Commissioners for Revenue and Customs Bill

Clause 10 - Treasury directions

Andrew Tyrie: I beg to move amendment No. 79, in clause 10, page 5, line 20, at end add
'except insofar as such directions conflict with the duty to act on behalf of the Crown as laid down by section 1(4)'. 
We had a go at considering this issue via a couple of other amendments this morning and I shall now have another go at persuading the Minister that, as it stands, the Bill is not right. After what was said this morning, I am more worried than I was before. I was expecting some clarification that would assuage my concerns and go some way to address my future concerns, but I have not received it. 
There are two basic issues in clause 10. With your permission, Mr. Hurst, rather than asking for a debate on clause stand part, I will cover all the points that I want to make about the clause in relation to the amendment. The first issue is: who controls Her Majesty's Revenue and Customs? The second is: who formulates tax policy? 
The amendment addresses the question whether HMRC really is a non-ministerial department. It is worth exploring some basic principles about what we want the relationship between the two departments to be. We want the department to retain its independence and we want the tax collection process to be entirely disengaged from politicisation or putative politicisation. As I understand it, clause 1(4) is designed to do exactly that. It says that HMRC is a non-ministerial department and that it is technically responsible to the Crown. 
However, clause 10 gives the Treasury a large slice of influence. Is it right that clause 10 should give the Treasury that amount of influence? On the basis of what the Minister said, I do not know what 
''directions of a general nature''
are and how they contrast with directions of a specific nature, which are, by implication, ruled out. If ruling specific directions out was the intention, the clause could have said ''the commissioners need not follow directions of a specific nature given to them by the Treasury'' and added, ''in this clause, specific nature means'' and then had a definition. However, we do not have such a definition. We have a clause in which I fear that the Minister has muddied the waters. 
I say in parentheses that I do not think that the Paymaster General or other Treasury Ministers have, in recent years, been engaged in nefarious activities or have tried to put pressure on the Inland Revenue to do  specific things. At any rate, I have no evidence to that effect; nobody has come to me to say that that is the case. What we are doing is putting in place legislation that may have an effect on some future Minister who may not act properly. 
When thinking about the issue, I decided that the best way to illustrate my point was to take an example. Let us take corporation tax. A Minister decides to introduce a corporation tax and feels the need to direct the commissioners to introduce it. That seems to me to be clearly a direction of a general nature. The Minister then decides that they want collection of that tax to be a priority. More resources are to be put into the collection of that tax than into the collection of other taxes. That is still probably a direction of a general nature. However, I am already in an area about which, on the basis of what the Minister said, I am not sure. What if the Minister tells HMRC to collect every last penny due under the corporation tax, even if that means the non-settlement of cases and a huge increase in the number of disputes taking place about that tax—cases going to court and so on? Would that be an instruction of a general or a specific nature? We can use common sense but we have no way of knowing on the basis of what we have been provided with so far. I think that it would be a specific instruction with very far-reaching implications for the way in which tax is collected, and not what was intended and what I think any reasonable person would want to find capable of being directed under the clause. We have no way of knowing whether the clause would exclude such a direction on the basis of what the Minister said to me in Committee this morning. 
I worry very much that there is a risk about powers. I think that the Paymaster General's words this morning, which I wrote down, were that ''they'' would need powers over the way in which the HMRC exercised its functions. I think that that is a very dangerous phrase and we need to know what it really means. What are the limits to those powers that the Treasury is taking on? So, I am not clear, after considering the clause, on the first question of who is really controlling HMRC. 
Now I want to tackle something trickier. Under the clause, who will run tax policy? It is clear that the Treasury wants more of the cake. It has wanted more influence on tax policy on every occasion that I have been aware of, or have been involved in any way with, the Treasury. This is not quite the same thing and I acknowledge that, but page 10 of the excellent O'Donnell report by the Treasury states that 
''the Treasury's capacity to advise on tax policy should be enhanced.''
There is a clear indication. However, I think that the Paymaster General said this morning that it was not the Government's intention to change the existing arrangements in any way. Whatever her intention might be, I am not too sure whether we will end up with exactly the same thing that we have had before. 
I think that there are real dangers in this area and I am not alone in that. It is worth considering what the Institute of Chartered Accountants in England and Wales said about the new arrangements for policy  making, which was quoted in the Treasury Committee report. It said, 
''there is a danger that this will widen the gulf which undoubtedly already exists between policy and operational issues.''
PricewaterhouseCoopers said: 
''There is a risk that the policymaking of the combined body becomes more detached from the implementation and operation, and indeed from practical experience.''
Therefore, we are not talking about the Minister trying to do things that a reluctant commissioner or group of commissioners might not want to do. We are talking about whether the integration of tax policy with the operational side of tax collection is adequate and satisfactory in the light of the clause. 
Let us consider other institutions that have been created, such as the Financial Services Authority. It is a body with a fine group of people at the top who, right from the start, have been thinking through very intelligent theoretical approaches to financial regulation. However, a great gulf has opened up between that and what is really occurring on the ground and what people have experienced as a consequence of regulation. What such voices—PWC and others—have been complaining about is that we might bring about a repetition of exactly that situation. 
No doubt the Paymaster General will tell me—I think that she has already implied this—that she has not ever issued any of these directions. Of course, the relationship between a Minister and a Department is all about timing. Ministers do not turn up in the office and say, ''I want the following five things done and I want them by 3 o'clock; this is a direction under subsection (3) with something or other.'' Quite clearly, people ask for something to be done and nine times out of 10 it is done. 
Occasionally, there is a row and when that happens the Chancellor will get involved and try to clear it up with a quiet word with the chairman of the Board of Inland Revenue, and when that fails there is a review meeting. Nearly 15 or 20 years ago I sat in on some of the meetings at which such interesting discussions took place. Such matters are resolved amicably—at least that was so in every case that I came across. This piece of legislation, however, might be entrenching the power to override the iterative process that I have just described. The Paymaster General will tell me that the process is exactly the same as we have had in the past and there is really no change at all, but we are not satisfied. 
The danger is that this dispute will mean that the O'Donnell report turns out to provide a much weaker distinction than Gus O'Donnell alleged. In his own evidence, he made a distinction between strategy and policy development and policy maintenance and delivery. There is a problem of creating a Division 1 and Division 2 Inland Revenue, with one group of people who feel that they are top dogs, because they are involved in rarefied, terrifically exciting policy work and another group made up of the poor souls who are given instructions from the top table and told to run off and find a way to collect the money without  their views being taken fully into account as part of the policy-making process. 
I am not happy with the clause. I would like a clear explanation of what ''a general nature'' means. I should also like clarification of the department's independence, which the Government say that they will retain. Perhaps the existing rules were always wrong—that is often so—but they were protected by precedent and how people did things. Perhaps the two changes—the creation of a new department plus the fact that there are existing policy-making arrangements whereby a group of people from the Inland Revenue are now sitting cheek by jowl with Treasury officials in the Treasury building—will create conditions in which understanding will be strained for the first time. That is one of the issues that has been perturbing me.

John Burnett: I am very grateful to the hon. Gentleman for giving way. I was not here this morning, for which I apologise, Mr. Hurst.
Do I understand the hon. Gentleman correctly? Does he believe that there are compelling reasons for greater co-ordination of tax policy and might that be done better by the Treasury? Nevertheless, there should be greater safeguards.

Andrew Tyrie: Yes, that is dead right. We do not want to find Ministers getting a bit closer to the business of collecting the money. However, we do not want the iterative process, with a distinction between those who have to collect it and those who are thinking up policy—which has historically made for a reasonably well-functioning tax system—to be fundamentally altered. The review makes it clear that the Government intend to alter that process; that is not denied. By altering the process—as is set out in the O'Donnell report and the Treasury Committee report—the Government may put pressure on what has previously been assumed to be a perfectly satisfactory level of protection on the point of ministerial direction. We could have lived with that, because we always have done so and have got used to it. However, that protection will not be so robust now in the defence of what we want to see defended.
I want to end by drawing the point a bit further. I said a moment ago that Treasury officials will find themselves sitting on the wrong side, although to Revenue officials down the corridor that may sound like a good idea. One group of them will have signed the oath and another group will not have done. To start with, there will have to be a Chinese wall between those two groups. One group will know about some cases coming up and that is why they will be concerned to get a particular clause in, and another group will not know about the cases as they discuss a particular measure. I think that that is perfectly possible but it would require a lot of attention. What worries me is that there could eventually be some leakage. It is absolutely crucial that taxpayer confidentiality is maintained. The moment that people think that there is not proper taxpayer confidentiality, the revenue base  will be at risk because people will get very nervous about what they tell the Revenue authority. 
Worse still would be the appearance or allegation that pressure, coming ultimately from politicians, was being put on a business or a wealthy individual, although I strongly suspect that that would be untrue. That would be extremely unfortunate. I will not go on about the Vodafone case, but that was an illustration of the fact that, whatever the reality, just the appearance of the weapon of the public domain has partially eroded big companies' trust in what is being kept confidential. 
We shall discuss the oath later, but I say in passing that I wonder whether, far from getting rid of it, we may be able to extend it to those officials working on policy alongside Revenue officials to enable them to hear some of the conflicts of information that may lead the Revenue to make proposals. 
Having said all that, I feel that clause 10 will not do; it needs much greater clarity and we need to know what is meant by ''a general nature'' and ''a specific nature''. We need more reassurance from the Minister. We are not minded to support the clause.

David Laws: Welcome to the Chair, Mr. Hurst. We had a useful debate on the clause during this morning's sitting, particularly when we discussed the amendments tabled by the hon. Member for Sevenoaks (Mr. Fallon). I had intended to leave all my comments on this part of the debate. However, we had a very interesting debate on amendment No. 3, which was pressed to a Division. It is a pity that the Government did not accept the thrust of that.
However, the debate is focused in particular on concerns about the ambiguity of the—relatively short—clause 10 and therefore about the supposedly arm's length nature of the relationship between Ministers and the Revenue and Customs. How will that work in practice? The hon. Member for Chichester (Mr. Tyrie) said that he was unclear about what ''of a general nature'' means in practice, and he is right to be so. I ask the Paymaster General how she would feel if she were told by a member of the Government that in the Treasury she was to remain liable and accountable to the Chancellor, but that she was expected to comply with any directions of a general nature given by the Prime Minister or some other member of the Government. It would be very unclear what ''of a general nature'' meant and how that would limit her normal powers of independence. What would that boil down to in practice? 
I do not want to go back to our earlier discussion, but the hon. Member for Sevenoaks tabled an amendment whose effect would have been to take out the words ''of a general nature'', and he said that that was a probing amendment. If it had been accepted, I would have been, if anything, slightly more concerned about the final situation. We would have been left with a situation in which the commissioners were obliged to comply with any directions given by the Treasury. That would have  sounded even more worrying, and would be even more liable to result in interference by Ministers in commissioners' day-to-day operations. 
The Paymaster General has given us a little insight—I hope that we shall get more from her on this—into the working relationship between herself and organisations such as the Inland Revenue and Customs and Excise, which are in theory at arm's length from her, but for which she is accountable in the House of Commons. Very often, for example for initiatives such as tax credits, Parliament will want the Minister to take a close interest in the effectiveness of a policy. 
The hon. Member for Chichester mentioned the development of tax policy and how the clause would work in those circumstances. Can the Paymaster General enlighten us as to how the relationship would work in practice at present, in a situation where, for example, we have had concerns about the operation of the tax credit system? Where a relatively simple system of rules and regulations is applied by the tax credits department of the Inland Revenue to particular cases—for example, in the case of overpayments—but where the Minister has concerns about how the policy affects people on low incomes and how the rules and regulations are interpreted, how would the Minister relay her concerns? Would it be in the form of a direction, or through some sort of debate? The nature of that relationship is critical to the right drafting of the clause. 
The Minister's earlier comments suggest that she fears that Opposition Members want her to publicise and be accountable for every element of her relationship with the Inland Revenue, Customs and Excise and the new body. We certainly do not expect that; we do not expect to see her popping into her diary her engagement with Mr. David Varney and others. But we are interested in cases when the Minister or her Department have given clear policy directions or advice to the Inland Revenue and Customs and Excise that may have an effect on how Government policy is implemented. Sometimes, directions could have a material impact on how Government policy is implemented, even though they might not change existing rules and regulations laid down in statute or elsewhere. The operation of the tax credit system is a good example of that. It would be interesting to hear more from the Minister about that. 
I was disappointed that the Minister did not accept another amendment tabled by the hon. Member for Sevenoaks on the issue. The amendment moved by the hon. Member for Chichester is not perfect, in that it does not deal with some of the issues highlighted in the early discussions, but at least it focuses the Government on their responsibility to allow the two bodies day-to-day responsibility and independence, as far as possible, unless they want specifically to interfere and lay down clear instructions that might otherwise counteract what the departments concerned are doing. 
These are quite important issues. They may seem somewhat esoteric, but one can certainly imagine circumstances in which they would lead to significant problems in the operation of Government policy, if  not under this Government, then under some successor Government.

Michael Fallon: I am grateful to you, Mr. Hurst, and you have been generous in allowing such a wide-ranging debate on the amendment. I am sure that you were right to do so, because this is an extremely important, although brief, clause. I hope that you will forgive me if I do not progress some of the arguments made about the nature of Treasury directions. As the debate has unfolded, both through the amendments that I moved this morning and the amendment moved by my hon. Friend the Member for Chichester, the Committee has become less clear about what we mean by a direction ''of a general nature''. I hope that the Paymaster General can give us a little more on that.
First, it is not clear to me at all what we mean by ''the Treasury''. That, presumably, is officials and senior officials as well as Ministers. This clause is not limited to ministerial direction. In fact, it means that a senior official involved in tax policy could give the commissioners a direction. I should be grateful if the Minister would comment on that. 
Secondly, as my hon. Friend the Member for Chichester argued, it is all the more important to be clear about what a direction ''of a general nature'' is, because we now have a unified department that is virtually inside the Treasury building itself. That is precisely why we need the relationship between Ministers and officials, commissioners and their staff to be as clear as possible when they are sharing the same cafeteria, when they are walking the same corridors, when they may be promoted or moving along different career paths within the same building, and when a number of them are moving from tax policy on one side of the House to tax policy on the other. We must get this relationship right. 
Mr. Hurst, in your absence this morning we heard a blurred definition of what ''directions'' might mean from the Minister. She referred to her discussions. She referred to decisions, matters she might perhaps have discussed with the commissioners that they may have wanted a steer on. She would give a decision and commissioners would then go and act on it. She referred at one stage to diaries. We are not talking about decisions, discussions or diaries. We are talking about formal directions that the Treasury decides to issue to the commissioners. 
I can well envisage the circumstances in which such directions are issued. For example, there may be a discussion about the use of resources. Halfway through a financial year, it may become clear that Ministers want far more priority accorded to one particular area of work than another, which is not covered by the annual remit that the Paymaster General referred to this morning, but is a creature of time and changing circumstances. The commissioner may say, ''That is fine; I am happy to do that'', but they should have a direction to do it. If that is not the kind of direction ''of a general nature'' that this clause is intended to cover, I should be grateful if the Paymaster General would perhaps give us some examples of directions ''of a general nature'' without going into detail, perhaps describing one or two that  have been given under previous legislation, or the sort of direction that she has in mind. 
The other suggestion that I would make to the right hon. Lady and the Committee is that if we are still unclear as to what a direction ''of a general nature'' is, perhaps we ought to include a definition of it in the Bill. The easiest way to do that would be to include a definition of ''direction'' in clause 46, the interpretation clause. After all, I see that in subsection (2) of that clause we define ''function''. If we define ''function'', I see no reason at all why we could not be clearer and define in the statute itself what we mean by a direction ''of a general nature''. Until we do this, the uncertainty surrounding this clause, the lack of clarity as to what a direction is, this hinterland between the annual remit given to the commissioners and their daily operational activity, this grey area between the two, will remain grey. Both sides of the House will be unclear as to exactly what kind of direction the Treasury is giving the commissioners and their staffs. 
We need more clarity in this area, and I think the Committee now realises that the Paymaster General ought to provide it.

Dawn Primarolo: Welcome to the Chair, Mr. Hurst. We are rehearsing most of the discussion we had this morning on a very important issue. As I was listening to the contribution of the hon. Member for Chichester, I reflected that there was something I should recommend as reading for the Committee: Jim Cousins's excellent book—he is also an hon. Gentleman—

Alan Hurst: Order. Hon. Members should be referred to by their official titles.

Dawn Primarolo: Thank you, Mr. Hurst. I apologise. Many hon. Members, including Opposition Members, have commented on the relationship between Ministers and Departments. That would have put into a helpful context what is a complex relationship. The idea that our excellent civil servants would allow a Minister from any Department to direct matters in something that was inappropriate, in breach of a Minister's code of conduct or an accounting officer's duty or value for money is truly repugnant.
Mr. Tyrie rose—

Dawn Primarolo: Do not get up now, please. I listened carefully to the hon. Gentleman and I now wish to elaborate on my argument. I understand clearly the idea that Ministers do not cherish and uphold the high principles of the civil service and its relationship to elected Ministers and the House. The debate is revolving around the general direction as it has always been used in relation to the Revenue department, the Revenue and Customs and Excise, the Ministers and the Treasury.
We must bear in mind the word ''direction''. I want to ensure that there is no question that a Minister would have the power to intervene in a way that would contravene taxpayers' confidentiality. Direction does not imply an instruction or order that overrides the  rules or views of the commissioner. To say that that would be exceptional is an understatement. 
I shall refer to why we settled on a general direction. The hon. Member for Chichester wanted to explore the definition of policy as opposed to operation. On the one hand, he argued for a clear separation but on the other he realised that the two aspects merge with each other and that there needs to be a clear understanding about that. The phrase ''general direction'' provides that Ministers can exercise control over the activities of the department in a sensible and fairly broad way as, indeed, the Secretary of State can in any Government Department. As I have made clear, during the course of exercising that control Ministers would expect to be engaged in discussions with departments in several ways. They would communicate their intentions and seek advice. 
In the process of developing policy, a Minister is working closely and directly with departments to inform them whether the policy is do-able, reasonable, value for money, whether it would require more resources or whether there should be a diversion of resources, to which the hon. Member for Chichester referred. That would leave the Minister accountable to Parliament and have an effect on the public service agreement target. The Minister would have to explain his action to the Treasury Committee, as I did. I said that I took a priority view because I knew that Parliament wanted such matters to be delivered and, as a consequence, I was informed that I was responsible. I did not point a finger at my civil servants; they told me what would happen and that it was reasonable value for money, but that I would be accountable for such action and not to blame my civil servants. Of course, that is absolutely what we are not going to do. 
Ministers can set the strategic, high-level protection for the department on policy and issues around it in dialogue and engagement with the department, and the clause seeks to ensure that that does not extend to taxpayers' information. The words ''general direction'' were carefully chosen to ensure that the day-to-day business of the Government continues through HMRC as it is created—[Interruption.] I wonder whether the hon. Member for Yeovil (Mr. Laws) will allow me to elaborate, because this is a complex argument. I am trying to explain how the relationship between a Minister and a department works and why ''general direction'' is not a problem. 
This morning and this afternoon the hon. Members for Sevenoaks and for Chichester raised specific issues regarding some rare and unusual circumstances, if they were ever to occur—I have been a Treasury Minister since 1997 and in my experience such things have never occurred, and I have checked with my officials for all other Ministers—where a Minister might direct the department, although the department had given advice against that decision, perhaps because it contravened value for money. In fact, I think I would refer to that as a special direction. In such circumstances the accounting officer would have to issue an accounting officer letter, because if value for money were  breached, or if there were issues around the poor use of resources or a breach of another area, that would be notifiable immediately to the Comptroller and Auditor General, who would then notify the Public Accounts Committee. 
The hon. Member for Chichester is trying to focus on whether the department can be instructed against all its knowledge, experience, expertise and understanding to do something that contravenes everything else that it has tried to do as a Government department under the rules of accounting, PSA targets or what is right and proper. 
The commissioners do not have to decide what is ''general'', or what that means. They have to decide whether a decision is appropriate and whether what the Minister has asked, requested, ordered, directed, or otherwise given as a ministerial decision, is inappropriate within organisation rules. If it is inappropriate, the Minister will receive an accounting letter that will be in the public domain and will be known, which is what the hon. Member for Sevenoaks wanted to know this morning. 
The hon. Member for Chichester asked about a specific matter, so I will deal with his example. If the Minister directed the department to collect every single penny of money that was due, regardless of circumstances or anything else, would that be a ''general direction''? That is an interesting example, because it raises all the issues. The first half of the answer is that that is a general direction, because it is an instruction to collect the money and not specifically about a taxpayer. However, it would immediately bring into play all the other requirements on the commissioners in deciding whether they would proceed with the ministerial request. For example, would it be value for money, or fair and equitable given the complex circumstances when we do not sometimes collect all the money back? Even though it is of a general nature, the decision would be subject immediately to the accounting officer arrangements, before we have got anywhere near the taxpayer's confidentiality—which we cannot do. 
That example is hypothetical and the hon. Gentleman acknowledged that. If it were to occur, the working relationship between the Minister and the department would have broken down to such an extent that I find it impossible to think how the department might function. All sorts of other issues would arise. I understand that the hon. Gentlemen see ''general'' and ''direction'' as an instruction on the way down and therefore that a direction is an order from a Minister. What does ''general'' mean? Perhaps in reality it is the other way round. ''General'' means that it cannot be specific. For example, a Minister cannot instruct the department or ask for information on taxpayers, or seek to design a tax policy with a particular taxpayer in mind to give an advantage. All that would be prevented, even though it is in the general policy area. 
The interesting thing about the two groups of amendments—

Michael Fallon: Will the Minister give way?

Dawn Primarolo: I will, but I will just return to the amendments that we considered this morning and the amendment before us.
Amendment No. 2 sought to remove all the—

Alan Hurst: Order. Unless the Paymaster General is doing this by way of analogy, we cannot return to those amendments.

Dawn Primarolo: I am indeed, Mr. Hurst. For this morning's debate and this debate I shall run either side of the same principle; should the Treasury Ministers have ultimately specific control or should they have no control? This morning's amendments sought to make specific controls and amendment No. 79 goes in the opposite direction—to the opposite extreme.
I take it that the amendments were tabled in order to have a decent debate about what was meant by ''general direction''. However, the amendment seeks to provide the commissioners with an independence across the whole function that they exercise. That would mean that the Minister would have a remaining function to express an interest and to give possible guidance on how they should perform, but would be completely unable to be accountable, because the Minister would have no control.

Andrew Tyrie: Will the Minister give way on that point?

Dawn Primarolo: I will, but let me finish the point. The question is where we set the balance. First, we must protect taxpayer confidentiality at all costs, which is why ''general'' is used. The provision cannot be specific; there cannot be direct intervention. Why was ''direction'' used? I was looking for consistency and such things have always been called that. They are called that in all Departments and it did not cross my mind that the two words together would create some loss of control or a way of asserting a Minister's control.
The Government's intentions are clear. The provision is not just about what is meant by general direction, which means not specific and not affecting taxpayers' confidentiality. It is one of the requirements on Ministers, civil servants and accounting officers that combine in a complex model to protect taxpayer confidentiality on the one hand and appropriate behaviour by Ministers on the other. It will ensure sensible advice from the departments both on operation and policy delivery, and a clear line of accountability to Parliament. Finally, it will develop the policy ability to give greater co-ordination and understanding in order to improve the tax system and make it fairer, more direct and accessible, in a sensible way, for taxpayers; and, dare I say it, to make it occasionally simple.

David Laws: I am grateful to the Paymaster General for giving way and for her clarification, which takes matters a little further. To be clear about this particular clause, is the Paymaster General saying that she would not expect the commissioners to comply with a direction of a specific nature if it were given to them by a Minister?

Dawn Primarolo: It would be for the accounting officer to decide whether the decision from the  Minister was inappropriate. I cannot think of an example to illustrate that. The department would advise me. A Minister does not just suddenly say, ''I want the department to do this''. There would have been a discussion of the issues and advice would have been given. If Ministers ignored good advice and still insisted on issuing the decision, the accounting officer would, as I said, decide whether that was inappropriate. If they decided that, the other rules would come into play.
Does the hon. Gentleman want to pursue that point?

David Laws: I am very grateful to the Paymaster General for giving way. I appreciate that she is trying to be helpful. Let us take one example of a direction that the Minister might want to give to part of the Inland Revenue in certain circumstances, for instance. If the Minster decided that she wanted to give a direction to the tax credits department to treat overpayments in a particular way when they appear not to be the fault of the individual who received the overpayment—because of computer error, for example—it is quite possible that legislation would take either the very strict approach that the department itself was taking, or would allow greater latitude. Would not the Paymaster General be prepared to give a specific direction, and would not it be acceptable to most people under those circumstances that she should do so?

Dawn Primarolo: I may give a specific direction but, on that basis, the Department would advise me as to whether or not there was a breach of value for money, equity or finance to all other taxpayers, whether the Government would be open to a legal challenge for unequal treatment and whether or not the National Audit Office would consider writing off an appropriate amount. The Department would advise me on procedure to deal with that.
I can only speak for myself in this example. If a Department tells me that a decision breaches value for money, accountability and fairness, and does not comply with the rules required of a department of civil servants within a Government Department, I can think of no circumstances in which, having been told that, I would then say to the Department, ''I have heard what you say, but go ahead''. The dialogue and advice that Ministers get is complex. We trust that the advice we receive from our civil servants is accurate, and we act on that basis; the hon. Gentleman has chastised me a number of times when he has not considered that the advice has been accurate.

Michael Fallon: The Paymaster General continues to present this clause almost as a dialogue concerning some debate between her and the commissioners. She has been helpful in getting over to the Committee the fact that she sees this clause as restrictive, and I fully accept that. But she describes the directions as ''of a general nature''; that is restrictive. That is a safeguard and is welcome, and it is why I did not press amendment No. 2 this morning. The difficulty the Committee has had this afternoon is simply the definition of the word ''direction''. It is not a decision that resolves an argument. We are seeking to establish what kind of direction that would be. 
The Paymaster General would help us if she gave an example of a direction of a general nature that she has given in the past three or four months, or three or four years—she has been in her position for a while—or an example of the kind of direction of a general nature that she might give in future. If she could describe one such direction, perhaps we could wrap the issue up and move on.

Dawn Primarolo: I have never directed the department. With the exception of PSA targets, which are published and set for all Government Departments, which strive to comply with them, I can find no examples—my officials have checked back to before the election of this Government in 1997—of the Minister of the day directing the department to do something. The words ''general direction'' have existed for a very long time; they are well understood and built into the training qualifications and the operation of all Government Departments of the civil service. For them, the words are clear.
Having been a Minister in a previous Government, the hon. Member for Sevenoaks will know that there are sometimes robust discussions between Ministers and officials when the Minister would like to develop a policy area but the officials say that it cannot be done; there is probing until the Minister is satisfied that it cannot be done. However, there have been no examples of officials being directed. The hon. Member for Chichester described very well the working and day-to-day relationships between the department, the Treasury and the Minister. 
Mr. Burnett rose—
Mr. Tyrie rose—

Dawn Primarolo: I am going to give way to the hon. Member for Chichester.

Andrew Tyrie: I am quite worried by what I have just heard. Am I making an intervention or is the Minister giving way?

Dawn Primarolo: I am giving way.

Andrew Tyrie: I shall say something at the end of the Paymaster General's remarks.

John Burnett: The Minister responded to the point about tax credits by giving a hypothetical example of her receiving advice, overruling it in a particular manner and giving a direction contrary to that advice. Earlier, she said that such a direction would come to light and eventually arrive before the Public Accounts Committee. Would that invariably be the case? How long would a case of a Minister overruling officials' advice take to get to that Committee?

Dawn Primarolo: I do not know. I have no experience or knowledge of Ministers' overruling direct, specific advice from within any of the Treasury departments or any others. That is a very hypothetical question. If the hon. Gentleman really wants me to pursue it, I shall ask my officials what the process would be if I had been that foolhardy. 
I shall ask my hon. Friends to reject this amendment if it is pressed to a Division, although I think that the hon. Member for Chichester said that it was a probing amendment. However, I seem to have made him more unhappy rather than less.

Andrew Tyrie: I am afraid so.

Dawn Primarolo: Maybe the moral of the story is that Ministers should not try to be helpful, but should just speak very narrowly to the point.

Andrew Tyrie: When the Paymaster General was being helpful this morning, I regretted that we moved on speedily, so she should not feel that. She seemed to imply that my amendment might lead to Ministers being virtually written out of the piece. That is an astonishing interpretation of what is a relatively straightforward clause. The overriding duty of a Department of the Crown is protected.
Perhaps inadvertently, the Paymaster General said something else that was astonishing. She said that she had not only looked to see whether any directions had been issued since 1997, but that she had asked officials to look prior to 1997 to see if there had been directions under a previous Administration. If she directed officials to do that, she was in breach of all sorts of rules, regulations and codes, which I shall not begin to enumerate because it would take too long. However, that is a very serious breach, and the officials concerned should have immediately come back and said that they were not prepared to do that.

Dawn Primarolo: Will the hon. Gentleman give way?

Andrew Tyrie: I will in a moment. I hope that, in fact, there was a slight slip of the tongue and that all that someone was tasked to do was refer to a few memoirs—''The View from No. 11'' for example—and to look up the word ''direction,'' and when they found nil return to report back to that effect.

Dawn Primarolo: First, I said I asked about other Ministers. Secondly, the issue of whether there was a direction is about whether or not an accounting officer letter was left, and that would be in the public domain. The hon. Gentleman is right; there is no way that I would ask that investigation to go back prior to May 1997. He knows that, but it was a good point to make; he has, as ever, been helpful, and I am grateful to him for allowing me to correct the record.

Andrew Tyrie: Good; I am grateful for that. I am left bereft of any understanding of why we will have this clause if the Paymaster General has concluded that she cannot conceive of any circumstances in which such a direction would be required. She said that there had never been any such direction, and that she could not think of any circumstances in which one would need to be made.
The Paymaster General also said that if a direction had been made, relations would have broken down so badly that it is inconceivable that the normal work of the department could have continued. That suggests that the clause has been written for a set of circumstances that are inconceivable, in which case what is the point of putting it in the statute book? However, I do not think that that is correct; the clause  has far more substance than that. That is why I am nervous. 
One specific reason why I am nervous is that the Paymaster General said that we cannot work out what the clause means by defining the word general. What we have to do is define a word that is not in the Bill; that word is ''specific.'' When pressed on what that word means, she said that she thought that we are partly talking about codes and inappropriate behaviour that Ministers might get up to, and other statutory limitations and conventions. However, officials will alert Ministers to them even without this clause, to make sure that things are fair. Finally, she referred to only one word, which is confidentiality; confidentiality of individual tax cases. What this clause really means—what it only means, as far as I can tell—is that a Minister may make any direction to the Treasury except where that direction will lead either to the creation of a tax that targets a specific individual or company or a demand for information about a specific taxpayer. That is a very narrow definition of what the clause means. I now find the clause deeply satisfactory.

John Burnett: One reason why we ask for fetters on the clause is that occasionally the taxpayer base is very small. Sometimes, there can be a taxpayer base of just one company and one major transaction. I am thinking particularly of stamp duty reserve tax. We were told in proceedings on the 1998 Finance Bill that all loopholes had been closed; I think that that related to the fact that stamp duty had changed so much. Contrary to those assertions, when British Petroleum merged with the non-US assets of, I think, Mobil—I might have the names wrong—something like £1 billion or £1.5 billion in stamp duty reserve tax was lost because the companies used a perfectly legitimate avoidance method.
The loopholes have not been blocked satisfactorily, and that gives a specific taxpayer's case relevance to Ministers. That is why we really need to know whether the duty that we are talking about is a duty to the Crown and a duty always to act in good faith. That is not to impugn the integrity of the Paymaster General here today. We want legislation that inures all Ministers, whatever the party in government. We want statute that ensures integrity, whoever has conduct of our affairs.

David Heathcoat-Amory: I shall intervene briefly. I could not be here this morning—I apologise for that—so I shall just emphasise two points that were made. I do so from the perspective of having been a Minister in the Treasury, and having had charge of Customs and Excise. I do not know whether that is an interest that I should declare. I am totally proud to have been in charge of the department for a year or two. On the basis of that experience, I am rather alarmed by the clause.
First, on the phrase ''general nature'', I understand that the Paymaster General believes the phrase to be a helpful restriction, but it is still fairly vague. In my view, it might not catch directions of a fairly specific but broad character, such as a direction to the new Revenue department not to pursue certain  investigations involving other Government Departments or agencies, or even public servants or Ministers. Such a direction might be interpreted, or at least varnished, as being a direction of a general nature. Such an act might not be specific to an individual, but nevertheless it would make considerable mischief. I am not sure that the restriction ''general nature'' gives an adequate safeguard. 
My other point is about the nature of the direction. I know that I missed this point being made, but has it been illustrated and confirmed that the new direction would have to be in writing? One assumes so. Quite apart from everything else, if it were not, the Minister would not know whether any direction had been given by previous Governments or Ministers. I would also like to probe the Paymaster General further on what she told the Committee about going through what had been done by previous Ministers in the Department to see whether they had issued directions. I do not know how she can be so sure whether those directions had been given orally. I have met the head of Customs and Excise regularly and nothing that I have said to him could possibly be interpreted as a direction. However, under the clause, the Minister of the day might have a new power to issue oral instructions. The instructions must be in writing and must be made public. When defending her remarks, the right hon. Lady said that matters were not known about previously because they had not been published and were not on the public record. Presumably, that means that instructions will be in writing and publicly available. Will she reassure the Committee about that?

Dawn Primarolo: I am happy to do so. I am surprised by what the right hon. Gentleman said. I refer him to the customs legislation. I shall provide the Committee with Inland Revenue evidence, too. Section 6(2) of the Customs and Excise Management Act 1979 states:
''the Commissioners shall, subject to the general control of the Treasury''.
Section 1(2) of the Inland Revenue Regulation Act 1890 states: 
''subject to the authority, control and direction of the Treasury''.
There is no statutory requirement to signify that such action be carried out by convention. 
The general direction requirement was used in 1890 in respect of the Inland Revenue and, under the more recent Act, for Customs and Excise. Ministers, including the right hon. Gentleman, operated within the definitions of general direction, using PSA targets, spending settlements, advice from Departments, and the priorities and policies pursued on behalf of the Government of the day. There is a saying, ''If something works, why fix it?'' Such a policy has worked. Everyone understands how it works. 
I say to the hon. Member for Sevenoaks that, when bringing together the two departments, it is important that in no way should there be any diminution of taxpayers' confidentiality. Even though such a requirement is set out in the Act to which I referred, it should be contained in the Bill. Our discussions today have been extremely helpful, but I am puzzled  by the response of the hon. Member for Chichester, who has knowledge of the Treasury, and of the right hon. Member for Wells (Mr. Heathcoat-Amory), who has been a Treasury Minister and operated within such general control and authority.

David Heathcoat-Amory: Could the Paymaster General now answer my question? I know how I operated under such legislation, but will she tell the Committee how she will operate under future legislation and say, in particular, whether the directions under the clause are to be in writing and are to be published?

Dawn Primarolo: The departments will ask me to make a decision when I have sought information from them. There will be a copy of that in writing. I then make a decision that is transmitted to the departments in writing. There will be a lot of dialogue and exchange of information. There will be meetings and an audit trail.

Andrew Tyrie: Will the Paymaster General give way on that point?

Dawn Primarolo: No. I want to finish my point before giving way. If I am being asked whether I have ever given an instruction to override specific advice given to me by either Department—I have been a Minister in both—the answer is no, I have never issued such an instruction.

Andrew Tyrie: We want to know what a direction is. In answer to my right hon. Friend the Member for Wells, the Paymaster General said, ''I send letters out all the time.'' Are those directions, or not? As I understand what she has said until now, they are not. She has now used the word ''instructions'', but this is the first time that we have heard it. They seem to be some higher layer, above directions.
We are thoroughly confused about what the clause means, and I do not think that the Government are too sure about it. Practice that has been rolling along for the best part of a century is going to be disturbed by the creation of the new department and the need to codify legislation. The provisions have not been thought through, so we shall press our amendment.

Dawn Primarolo: Although I gave way to the hon. Gentleman, I said a very long time ago what the provision means. It means that Ministers can set strategic, high-level direction. I really regret what hon. Members are saying about their difficulty with the word ''directions''. They have asked whether it means instruct, enforce or require. In responding, I have tried to probe what it means. It means that Ministers can set the strategic, high-level direction on policy, expenditure, the use of resources, PSA targets, spending settlements and—the Bill provides for this for the first time—the annual remit, which will be published. That is what it means. 
Question put, That the amendment be made:—
The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived. 
The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 89, That the clause stand part of the Bill:— 
The Committee divided: Ayes 8, Noes 6.

Question accordingly agreed to 
Clause 10 ordered to stand part of the Bill. 
Clauses 11 to 15 ordered to stand part of the Bill.

Schedule 2 - Functions of Commissioners and Officers: Restrictions, &c. Amendments made:

No. 21, in schedule 2, page 27, line 17, at end insert— 
'A power under any of the following provisions of the Taxes Management Act 1970 may be exercised only in connection with functions relating to matters to which section 6 above applies— 
(a) section 21 (stock jobbers' transactions), 
(b) section 23 (copies of registers of securities), and 
(c) section 24 (information about income from securities).'. 
No. 22, in schedule 2, page 27, line 18, leave out 
'the Taxes Management Act 1970 (c.9)' 
and insert 'that Act'. 
No. 23, in schedule 2, page 28, leave out lines 12 to 14 and insert— 
'(1) Article 85 of the Police and Criminal Evidence (Northern Ireland) Order 1989 (application to customs and excise) shall not apply to investigations in connection with a matter to which section 6 above applies. 
(2) Section 6(4) above shall not have effect in relation to a function conferred by order under Article 85 of that Order.'. 
No. 24, in schedule 2, page 29, line 21, after 'obtained', insert 'or is held'. 
No. 25, in schedule 2, page 29, line 27, after 'obtained', insert 'or is held'. 
No. 26, in schedule 2, page 29, line 32, leave out 
'was obtained in the exercise of a function' 
and insert 
'has not been held solely in the exercise of functions'. 
No. 27, in schedule 2, page 29, line 38, after 'obtained', insert 'or is held'. 
No. 28, in schedule 2, page 29, line 39, at end insert— 
'Terrorism Act 2000 (c.11) 
Information may be supplied in accordance with paragraph 4(2) of Schedule 14 to the Terrorism Act 2000 (c.11) (exercise of officers' powers) only if the information has not been held solely in the exercise of functions relating to matters to which section 6 above applies.'. 
No. 29, in schedule 2, page 30, line 5, after 'obtained', insert 'or is held'. 
—[Dawn Primarolo.] 
Schedule 2, as amended, agreed to.

Clause 16 - Use of Information

Amendments made: 
No. 6, in clause 16, page 7, line 12, after 'international', insert 'or other'. 
No. 7, in clause 16, page 7, line 12, after 'Kingdom', insert 'or her Majesty's Government'. 
No. 82, in clause 16, page 7, line 26, at end insert 
'(4A) In subsection (2) the reference to an enactment does not include— 
(a) an Act of the Scottish Parliament or an instrument made under such an Act, or 
(b) an Act of the Northern Ireland Assembly or an instrument made under such an Act.'. 
No. 83, in clause 17, page 8, line 22, at end insert 
'and 
(e) a reference to an enactment does not include— 
(i) an Act of the Scottish Parliament or an instrument made under such an Act, or 
(ii) an Act of the Northern Ireland Assembly or an instrument made under such an Act.'. 
No. 85, in clause 36, page 18, line 5, at end insert 
'(10) In subsection (2) the reference to an enactment does not include— 
(a) an Act of the Scottish Parliament or an instrument made under such an Act, or 
(b) an Act of the Northern Ireland Assembly or an instrument made under such an Act.'. 
No. 86, in clause 46, page 22, line 25, at beginning insert 
'except where otherwise expressly provided,'.—[Dawn Primarolo.] 
Clause 16, as amended, ordered to stand part of the Bill.

Clause 17 - Confidentiality

Amendment proposed: No. 8, in clause 17, page 7, line 31, at end insert 
'in connection with a function of the Revenue and Customs'.—[Dawn Primarolo.]

Alan Hurst: With this it will be convenient to take the following:
Amendment No. 4, in clause 17, page 7, line 31, at end insert 
'and at the time of their appointment shall make a declaration in the form set out in new Schedule [Form of declaration] before another official.'. 
Government amendments Nos. 90, 91 and 92. 
Amendment No. 80, in clause 17, page 8, line 9, at end insert— 
'(4) A disclosure made under subsection (2) may only be made under terms which will preserve the confidentiality of the information involved in the disclosure.'. 
Government new clause 3—Disclosure to prosecuting authority. 
Government new clause 4—Data protection &c. Government new clause 5—Disclosure of information to director of revenue and customs prosecutions. 
New schedule 1—Form of declaration. 
Mr. Fallon Thank you, Mr. Hurst. You are working hard today. To give you some relief, I shall speak to amendment No. 4, tabled in my name and that of my right hon. Friend the Member for Wells, although it is largely self-explanatory.
The issue of confidentiality has been demonstrated throughout our debates to be extremely important. It was important to the O'Donnell review; when Mr. O'Donnell gave evidence to the Sub-Committee, he said that maintaining taxpayer confidentiality is vital. I hope that you will bear with me if I quote in full paragraph 53 of our report: 
''The transfer of responsibility for tax policy development to the Treasury and the move of some Customs and Excise and Revenue staff to the Treasury building have raised concerns about confidentiality. We welcome the commitment given to maintaining taxpayer confidentiality and the assurance that there will be no access by Treasury officials or Treasury Ministers or special advisers to individual tax records and recommend that this principle be carried forward into the bill.''
The issue is whether that principle has been properly carried forward into the Bill by clause 17. It is often thought that taxpayer confidentiality is something so secret that it can never be breached. At the risk of upsetting the Committee, I have to remind it that the confidentiality of one taxpayer, Mr. Norman Scott, was breached back in 1976, when the then Labour Prime Minister, Harold Wilson, instructed that Mr. Scott's DHSS file be researched by the Secretary of State. I quote simply one sentence from a book that will be familiar to you, Mr. Hurst, ''The Castle Diaries 1974–76'': 
''Thursday 12 February I hurried into Cabinet early to give Harold the résumé Jack has done of the Scott file.''
The Jack there is Mrs. Castle's former special adviser, the current Foreign Secretary. So, we know that there have been breaches of confidentiality, but some time ago. Let us take at face value the assurances that we have been given that this Government accept that we should do everything possible to maintain taxpayer confidentiality. If we are to maintain it, it is  essential that the oath of confidentiality that every member of both the Revenue service and the Customs service takes on his or her appointment be continued. However, it has emerged since the Bill was published that the Government intend to scrap the oath. That is something that we need to resist. 
The Paymaster General, when she was pressed on those matters on Second Reading, implied that the oath, or the statutory declaration that the oath has become, will be part of a more general employment contract that will presumably list all sorts of other terms and conditions, including bank holidays, holiday entitlement and sick pay and all the rest of it, in a long document that the new official entry department will sign: an all-embracing terms and conditions document with one signature appended to it. I do not think that that is satisfactory and it does not maintain the kind of confidentiality that I want to see enshrined. 
The oath currently takes the form of a statutory declaration made in front of another official in the same service at the time of appointment. The wording for that is cobbled from existing legislation and is, as hon. Members will see immediately, a solemn act that is not bound up with other terms and conditions that are undersigned. The oath is a solemn act that carries some weight and I think that it makes the declarer think for a moment about what he or she is declaring and acknowledge the formal importance of the confidentiality. Instead of that, however, I understand that the Paymaster General is now offering us the duty of confidentiality only—not an oath or statutory declaration—which will be tucked away in an employment contract with the other terms and conditions. That divests the declaration of confidentiality of the weight and singular importance that should attach to it. As I said this morning, that is all the more worrying because we have a vast, new merged department with all the officials and records together that is being placed in the same building as the Ministers and special advisers who transgressed before and may do so again. 
I repeat that the Treasury Committee recommended that taxpayer confidentiality should be maintained, welcomed an assurance that there would be no access to individual tax records and recommended that that principle be carried forward into the Bill. Clause 17 is not adequate for that purpose and there is no good reason to dispense with the existing statutory declaration.

John Burnett: I support amendment No. 4. I am a lawyer like you, Mr. Hurst, although I do not practice and I do not know if you do—that is none of our business. I declared on Second Reading that in 25 years as a tax practitioner I had no cause to complain about the conduct of the Inland Revenue and its employees. I had many disagreements, but those were resolved professionally. Having said that, there are of course bad apples that can get through the system one way or another and have to be brought to account.
The Inland Revenue culture is admired worldwide, and part of that culture is the professionalism of its  members, who know that they have similar responsibilities to those that lawyers have for their clients and doctors have for their patients. That is brought home to them at an early stage by, among other things, high training standards, high-calibre recruits and the statutory declaration that they make, which illustrates that being a member of the Inland Revenue is not like any other Government job. It is not like most other employment. It carries very special responsibilities. We all know that any breakdown or erosion in taxpayer confidentiality will have the most appalling effects on the collection of tax. 
We should be taxed by law, and we are taxed in major part by consent, albeit reluctantly. I believe that anyone with confidential taxpayer information should make a special statutory declaration to bring home those special responsibilities to her and to him. 
The principle of confidentiality is simply not clear to individuals when a 22-page employment contract is put in front of them that contains this and that provision, information about holidays and pay and all the other matters that are included in an employment agreement. It must be brought home to employees at the Inland Revenue in a special and compelling way. This oath would do exactly that. We support the amendment. It is important, and anyone, including the Treasury officials, who has taxpayer-sensitive information should make a statutory declaration. That includes members of the supervisory bodies, including the Independent Police Complaints Commission, which we will debate. They should make the declaration if they are going to have taxpayer-sensitive information. 
The Inland Revenue has a fine record, and I do not believe that any Opposition Member will demur from what I have said. When I have debated other matters in other Committees with the hon. Member for Chichester, he has been only too willing to confirm exactly what I have said about the high standards of our Revenue. We want to keep it that way. There is no reason for change. A statutory declaration in the form suggested by the amendment would, like nothing else, hit home to bodies such as the Inland Revenue and Customs that they have a special duty of care and confidentiality. Many of us said on Second Reading that it is important that the Inland Revenue culture prevails in this matter. Many aspects of the Inland Revenue culture came in for praise on Second Reading. I want this oath to be retained for all the combined agencies.

David Heathcoat-Amory: I very much support the remarks made by my hon. Friend the Member for Sevenoaks. As a member of the Treasury Committee, I, too, support the recommendation that there should be no dilution in the defences against unauthorised disclosure. We should not simply take taxpayer confidentiality for granted. It is important, and it is very much in the interests of the Revenue departments, because people will co-operate freely with the Revenue authorities only if they can be sure that the information given is protected. I do not know if it is still the case, but I was told some years ago that all tax returns in Greece are published. A book is published  every year of the tax returns of all the taxpayers in that country, which is immediately filed in the fiction department of all public libraries. It is often said that openness and transparency has a beneficial effect on the client.

John Burnett: In a similar vein, I understood that the same prevails in Italy. When Fiat took over Ferrari, people looked to see what contributions the Ferrari family would make in the tax year in question, but I do not know whether they managed to do so and to locate where they were in the order of merit, as it were.

David Heathcoat-Amory: The hon. Gentleman is right. It is a Latin habit to publish everything of that nature, but it does not help compliance—quite the reverse; it is when people feel that their private affairs are to be respected that they co-operate most freely and give the necessary information.
It is vital that that culture and the safeguards are reformed in the way proposed in amendment No. 4 and in the new schedule. The financial temptations for Revenue officers are considerable. The tabloid press would love to get detailed tax returns of prominent people, and companies would like to see the tax returns of their competitors. That reinforces the point that our every defence, including the statutory declaration, should be carried forward. 
Government amendment No. 92 allows disclosure for certain purposes. It mentions 
''the purposes of a criminal investigation or criminal proceedings (whether or not within the United Kingdom) relating to matter in respect of which the Revenue and Customs have functions''.
The amendment is a late addition. The Bill is littered with Government amendments, which is regrettable; the Government have had months to prepare the legislation, yet many amendments are being brought forward. Will the Minister explain precisely why the amendment is to be made? The Bill already provides for disclosure for the purposes of civil or criminal proceedings, so why are we adding criminal investigations, whether or not within the United Kingdom? 
I can easily envisage a situation in which foreign Governments and authorities would wish to receive information about British taxpayers, companies or partnerships, in pursuit of real or imaginary crime, or acts that may not be crimes under our own law. The amendment authorises the Revenue to disclose information to people in other countries for unspecified purposes, because ''a criminal investigation'' is very wide. 
The notes on the amendment simply say that the amendment provides for disclosure to the prosecution authorities. I do not know whether that means foreign Governments, Revenue departments, governmental and quasi-governmental agencies elsewhere, the United Nations or agencies of it, and countries within or outside Europe. The amendment is very wide. I would like the Minister to tell us what she envisages under it, particularly as there has been a change as to whether it should relate to Revenue or Customs functions. Under the Bill as originally published, disclosure for criminal proceedings has to relate to a function of Revenue and Customs. That has  now become much more contorted. It has only to relate to a 
''matter in respect of which the Revenue and Customs have functions''.
We are getting further away from the function of the Revenue and Customs. I am unclear as to why that should be. It seems to me that it will simply widen the possibility of allowing the departments to pass on information to pretty well anyone, in any part of the world, who purports to be an authority that may be undertaking a criminal investigation. Perhaps the Minister could give advice on those specific points about the Government amendment in addition to taking on board my strong support for the amendment that we have tabled.

Andrew Tyrie: I rise to support amendment No. 4. I agree with just about everything that I have heard so far. It seems to me that this clause raises two questions, one of which was put to me by a number of accountancy bodies.
The first is whether clause 17(2)(a)(i), which states that disclosure can be 
''made for the purposes of a function of the Revenue and Customs'',
could mean that a decision could be made by officials to trigger the disclosure of information to bring about a demonstration effect in order to secure a better practice by an industry. If the Minister and the Revenue department conclude that the behaviour of a section of an industry or a tax loophole is unacceptable, could the clause be used to expose what that company is doing, as a demonstration in order to achieve a particular outcome? 
I raise that point not for hypothetical reasons, but because I have in my hand an extract from Accountancy Age, which states: 
''Vodafone, one of the world's biggest mobile phone companies, has denied dodging hundreds of millions of pounds worth of VAT, following a confidential meeting with Customs and Excise.''
It goes on: 
''Details of the meeting were leaked to the Financial Times just hours after the meeting took place.''
I do not think that Vodafone had much interest in leaking that information. It is possible that it was somebody at Vodafone, such as one of the advisers, but it is also possible that it was leaked by someone in government, who should not have done so. The main beneficiaries of the leak were the Government, because it is widely held in the industry that the demonstration effect has shocked parts of that sector into wondering whether the way in which they were hoping to achieve tax liability was appropriate. 
I am confident that the Minister will reply that that has nothing to do with the Bill, and I will believe her if she tells me so. I am fairly confident that she will be able to tell me that the intention of the proposal is not that it would be used to trigger such demonstrations. I would like that reassurance, because a number of people who work in the industry have told me that they are worried that it could be used for that purpose. 
The second major issue about this clause is the one that has seen most debate so far. Will the fact that the Government intend to remove oaths of confidentiality  result in a change in the culture of confidentiality? I worry that it might. I support David Varney's appointment. He seems to be a good man, from everything that I have read about him. I have met him only once. He has been heard saying at a number of functions, talking to the tax industry, that his experience of Sweden has shaped his thinking about the way to collect tax. 
I heard my right hon. Friend the Member for Wells say that it is a Latin trait for countries to want to make information public, but in Sweden one can apparently look up any citizen's tax returns for a token fee. David Varney goes around telling everybody this, and then points out that this is one possible route that countries might want to pursue in the long run. Doubtless this is his policy, and I hope—referring back to clause 10—that it will remain an election priority. 
It is not only not our policy; it is not our culture. We do not have a culture of such disclosure in this country. Nor is it our culture to disclose information about people in public life; in the United States there are very clear limitations on the duty of confidentiality laid down in order to produce a higher level of accountability for politicians, for example. 
In the UK, we start with the principle of confidentiality and we stick with it. We do not want the Swedish model, and we do not want the American model. I think political culture is crucial to the whole matter. I once had a meeting with the then Finance Minister of Malta, and we ended up discussing champagne socialism. He certainly was not a socialist. He said, ''I do not know why you are so squeamish about exposing champagne socialists, Andrew. Just get hold of their tax returns and publish them! What are you doing?''. He continued, ''You are far too soft. You should realise that, in Malta, at various times, if you are on the wrong side of the political fence you can soon find yourself pushing up the tulips.'' He described to me a political culture that was, with respect to tax collection, completely alien to the one I was trying to describe to him.

John Burnett: It sounds Sicilian.

Andrew Tyrie: Of course, Malta was ruled from Sicily for a while.

Dawn Primarolo: That is a very interesting story. Perhaps the hon. Gentleman could tell us in what capacity he was meeting a Minister of another country. Was he an adviser? Was he employed in the Treasury? Or was he there as a shadow Minister?

Andrew Tyrie: I cannot—

Alan Hurst: Order. We should return to the subject under discussion.

Andrew Tyrie: I will certainly tell the Paymaster General in some detail after the sitting.
The oath is important to us. I am sorry that the Government seem to think that we should get rid of it. We accept oaths as part of our culture in many ways. We accept that they bring an extra degree of solemnity  and a sense of importance to what people say in courtrooms. We accept that it is important to take oaths before we take our seats in the House of Commons. A good number of my colleagues think that it should be appropriate for people giving evidence before Select Committees to take an oath to reinforce their duties. 
I cannot see any harm at all in keeping the oath. I cannot see any downside whatsoever in the status quo. Even if some who take the oath consider it a bit old fashioned, it cannot do any harm. Even if only a minority of those who take the oath find they are the few that it means something to, it must surely be worth keeping. I feel that there is a spurious cult of modernity about with respect to the oath. I do not think that that will do anybody any good.

John Burnett: Will the hon. Gentleman give way?

Andrew Tyrie: I am just winding up. I support my hon. Friend's amendment. We need to send a clear signal that we should keep things as they are.

Dawn Primarolo: This is has been an interesting and important debate. We want to ensure beyond any shadow of doubt that those who have access to taxpayer-confidential information for the purposes of their employment should be under a duty not to disclose it. There should be a sanction for any civil servant foolish enough to do so. The issue is how we do that, rather than whether it should exist.
The hon. Member for Torridge and West Devon (Mr. Burnett) talked about Treasury officials and said that if they had access to taxpayer-confidential information they should be covered by the confidentiality provisions. I must make it clear that Treasury officials will not have access to taxpayer-confidential information. If they do not need it to discharge their functions they will not receive information. The new Department of Her Majesty's Revenue and Customs will not disclose to the Treasury officials any confidential information. Members of the Committee are correct to raise that matter. I want that to be clear on the record. 
Mr. Burnett rose—

Andrew Tyrie: Will the Minister give way?

Dawn Primarolo: I will give way, but as I was responding to a point made by the hon. Member for Torridge and West Devon, I will take his intervention first.

John Burnett: I am grateful to the Paymaster General. I know that she regards this issue as one of great importance. I am glad that she has put that point on the record. There will be other organisations, for example, the Independent Police Complaints Commission—

Dawn Primarolo: I was coming on to that point.

John Burnett: Fine. I will wait for her to knock that point on the head.

Dawn Primarolo: I am grateful to the hon. Gentleman for being patient. I wanted to make it clear that Treasury officials will not have information and that any disclosure to them will be a criminal offence. Secondly, where information is required to  carry out the responsibilities of, for instance, the Revenue and Customs prosecution service, the duty not to disclose it will transfer with the information together with a criminal sanction. Where taxpayer information is disclosed to the Independent Police Complaints Commission or to the Crown Prosecution Service there will be the same requirement to protect it.
Before I deal with the demonstration effect in the case that has been quoted, does the hon. Member for Chichester want to intervene?

Andrew Tyrie: I am very grateful to the Paymaster General. A moment ago she said that Treasury officials would not have access to the information, but they will be sitting in offices next door to people who presumably will have access. We all know how offices work. Will the Revenue officials who are in the Treasury building have access to individual files and information on cases? Will the files containing that information be stored in the Treasury building?

Dawn Primarolo: Yes, the Revenue officials who require access to that taxpayer information in discharging their duties will have access to information and they will be under a duty not to disclose that information. The hon. Gentleman seems to suggest that, despite that, the location, in a complex of offices, will somehow blur things. There is a requirement to protect information and the duty on an individual official is enforceable by prosecution for a criminal offence. That is extremely important. On protection, the question is not just whether offices happen to be shared, but how information is transmitted in offices.
The hon. Member for Chichester raised two points, one of which was about the demonstration effect. I am happy to reassure him that is not the Government's policy to name and shame, which would in any case require access to confidential information. As a Minister, I do not think that it would be possible to maintain taxpayer confidentiality under such a scheme. Taxpayer confidentiality and the confidence of the taxpayer to comply with the obligations relates exactly to the hon. Gentleman's point about disclosure of information in the knowledge that it will be used appropriately and not inappropriately, which must be continued. 
The hon. Gentleman went on—I am mystified by this, quite genuinely—to refer to a individual taxpayer, Vodafone. I am afraid I have no knowledge of that. I could not comment on a taxpayer's information. Sometimes hon. Members laugh when I say that I cannot answer a question because of taxpayer confidentiality. In fact, that happened at the last Treasury questions, when I was asked about a taxpayer. I said that I was afraid I could not answer the question because of taxpayer confidentiality, which prevented me from having access to information on whether the organisation in question paid corporation tax. 
I genuinely have no idea about the answer to the question that the hon. Member for Chichester asked. I am not aware of any complaints. No issue has been raised with me. The matter is important and I checked quickly with the Economic Secretary to ensure that the  issue had not been raised with him. I am genuinely mystified and do not know the answer. The clear and important answer is that the demonstration effect is not being applied, will not be applied and is not sensible. 
On the issue of whether to have an oath, the current state of play is that the Inland Revenue requires a declaration, but Customs and Excise does not and never has done. Provisions are written into the legislation and even into employment contracts. Staff understand clearly that they are not to breach confidentiality and have not taken the view that they should not protect it. Therefore, we needed to consider how to take forward the powerful arguments that hon. Members have made today, and I absolutely concur about the importance of protecting confidentiality. 
Perhaps it would be helpful if I explained how the statutory duty will work, why it is preferable to the oath and why we took this route. The essential issues are standards and confidentiality. Clause 17 sets out a binding statutory duty of confidentiality, which will automatically bind all the staff of the new department on its creation, without the need to wait for any formal agreement on their part. It will also become binding on any new members of staff upon their taking up their job, even before the formalities have been concluded. Therefore, our approach immediately places a binding statutory duty on staff, whether they are in post at HMRC at its inception or join later. 
I recognise the point hon. Members have made about culture, but a culture of taxpayer confidentiality requires continuous reinforcement within the organisation. That culture must be constantly reinforced during the working lifetime of an official. I appreciate that hon. Members see a formal statement on joining the department as important, but I think that we need to go further. The letter of appointment to the new department will include a specific section on the duty of confidentiality, and officers will have to sign to acknowledge and accept the terms. 
I entirely recognise, as I did on Second Reading, the points that hon. Gentlemen have made about provisions in someone's employment contract not being drawn to their attention and about people not reading all their contract. However, the duty will be drawn to officers' attention and will be emphasised during induction training and in regular messages throughout their career. The uniform way in which the statutory duty will apply to every member of staff will be a valuable tool for building and maintaining the culture of confidentiality that we all want. 
The route that the Government have taken is to place the duty in the employment contract and to require all staff to have the contract on moving to the new department. We want to ensure that the requirement of confidentiality is drawn specifically to their attention and that they are constantly reminded of it throughout their career through regular intranet communications. All of that is vital. 
I need to correct myself about what I said was the current position. For Inland Revenue staff, it is at the beginning of their career; for Customs and Excise the  matter is in legislation, but I think that I said it is not in long contracts. That is not correct. It is in the employment contacts of Customs and Excise. However, I want to go further. 
My hon. Friend the Economic Secretary and I are looking at the matter. First, on appointment, it has to be drawn to the attention of the individual. Secondly, it must be done on induction, so that new members of staff know. Thirdly, it must be constantly reinforced throughout the career, which does not always happen. That underlines my contention, in reply to the hon. Member for Chichester, that being in the same building will not necessarily result in slippage, and that those who have the duty will not somehow forget it or breach it, even inadvertently. It is an enforceable part of their duty, yet we have gone much further. 
We take many oaths at the beginning of a process; we do, as Members of Parliament, and so do Ministers. I certainly did as Paymaster General. However, I consider that not to be enough. The fact that taxpayer information is confidential will be constantly reinforced in the department, and it will be underlined in the employment contract. With respect to the strongly held views of the Treasury Select Committee, of which I took a great deal of notice, and with respect to the points that have been made today, I am still of the view that the route that the Government have chosen is stronger and better. I say that with regret because it is something on which we should agree. Should the matter of the oath be put to the Committee on a vote, I would ask my hon. Friends to oppose it. 
Other, wider questions were put by the hon. Member for Torridge and West Devon about IPCC, the HMRC and the Crown Prosecution Service. Lawful disclosure of that information is covered in clauses 25 and 26. It is absolutely correct to make that clear. 
Lastly, I shall deal with Government amendment No. 92. The amendment changes the wording because, on advice from my officials—I concurred with them—it was thought that the original formulation could be improved. There are proceedings to recover unpaid taxes; for example, it would relate to matters for which HMRC had a function for the collection of tax. However, the function proceedings themselves mean that there must be a drafting change to ensure that the wording is right but without changing the substance of the provision. The proceedings and investigations are limited to those having a connection with a function. It seems sensible to have a parallel power to make foreign disclosures, so that those HMRC and RCPO—Revenue and Customs Prosecutions Office—provisions can continue. However, they should be limited. We already have those arrangements. 
The hon. Member for Torridge and West Devon and I frequently discuss double taxation treaties. There is an exchange of information provision to facilitate this type of exchange of information. That is provided for, improved and tightly controlled. It is negotiated within treaties. For the record, we have followed the agreements on the exchange of this information that  are in double taxation treaties that have been negotiated.

David Heathcoat-Amory: Before the Paymaster General finishes, will she answer the question I asked her? It was about the width of the powers. They go way beyond provisions for information exchange and provide for information to be given not just for criminal proceedings but for criminal investigations and to any body holding itself up as a prosecuting authority anywhere in the world. Therefore, the powers appear to go much wider than the example that has been given.

Dawn Primarolo: That was the right hon. Gentleman's second point on Government amendment No. 91. His first point was about Government amendment No. 92. I was going to come on to his second point.
Investigations from prosecutions will now be shared between HMRC and RCPO. Disclosures for the purpose of criminal investigation cover matters such as disclosing evidence to the Scottish sheriff to serve a search warrant under common law, and may cover disclosure of civil proceedings to get an injunction to freeze assets as part of criminal investigations. 
Disclosure to foreign investigators and prosecutors are necessary when fraud spans national jurisdictions. Parliament has already endorsed that; it did so in the Criminal Justice (International Co-operation) Act 1990. The UK co-operates with our European partners for the mutual recovery of tax duties throughout the European Union. We want to make sure that those arrangements that already take place—they will have taken place when the right hon. Gentleman was a Minister—can continue to do so, but only within specific requirements. The amendments are as clear and precise as necessary; the right hon. Gentleman is right that information should be disclosed only for the intended purposes, and not for any other purposes such as fishing expeditions, or where the safeguards that I have outlined do not exist.

David Heathcoat-Amory: I am grateful, but the Paymaster General has still not answered my point. If the measure is to comply with international obligations, why is that not stated? I can think of examples where other countries—Zimbabwe, for example—might want information about one of their citizens who is now a resident of the UK. They could apply for and receive that information on the basis that it is for what they call a criminal investigation. That would have nothing to do with any international framework, and disclosure of that information would be against the interests of that taxpayer. Can the Paymaster General answer the point that I raised, rather than the one that she wished that I had raised?

Dawn Primarolo: With respect, I did answer the question that the right hon. Gentleman asked. The example he gives is totally erroneous. I made it clear that the crime has to span national jurisdictions, and things have to fall within the requirements of the Criminal Justice (International Co-operation) Act.

David Heathcoat-Amory: Where is that stated?

Dawn Primarolo: I am saying it to the right hon. Gentleman now, on the record. If he would like me to write to him chapter and verse on it, I should be happy to do so. These are powers from prior to 1997, and it is not necessary for their machinery to be included in the Bill. It is only necessary that the provisions tie in with the relevant legislation.

Michael Fallon: I am grateful to the Paymaster General for the seriousness with which she has taken this debate, a seriousness that this issue deserves. She has accepted that we need to reinforce confidentiality. There is common ground among Committee members of all parties. The difference between us is how best to reinforce confidentiality. The Paymaster General says that the duty of confidentiality will be written into contracts; that there will be a section on it in the letter of appointment; that it will be included in induction training; and that the message about confidentiality will be repeated throughout an official's career.
First and foremost, none of those four things is incompatible with having the oath. She says that we would go further than the oath. If that is the position, why dispense with the oath? None of those things would replace the oath. It could stay at the beginning, and those four additional points could be incorporated. I do not see any case for dispensing with the oath. 
When we asked Mr. O'Donnell about that point, he replied, as I have said, that 
''maintaining taxpayer confidentiality is vital.''
He went on to say: 
''The Chancellor made it absolutely clear to me at the start that under no circumstances should anything we do damage that.''
Dispensing with the oath would damage that. I welcome the steps that the Paymaster General offers to reinforce confidentiality, but I still think that there is a very strong case for retaining the statutory declaration. I shall press for a Division on this issue.

John Burnett: None of us demur from what the Paymaster General has said. We all want to ensure confidentiality, and we want Inland Revenue employees to be buttressed in that. Making an oath is not just a symbolic, but a solemn matter. We ask for an oath from executors and those applying for letters of administration. We want to keep a Rolls-Royce system of Inland Revenue confidentiality and we want it grafted on to the combined agency of the Inland Revenue and Customs. The Paymaster General has made admirable points, and the criminal sanction is spelled out clearly in the relevant clauses. However, let us not allow even the perception of watering down to occur; let us keep the oath. I ask the Paymaster General to consider that matter again in the interests of preserving the highest standards at the combined agency of the Inland Revenue and Customs.

Dawn Primarolo: I want to respond specifically to the hon. Gentleman's point, but I am not sure how to do that. I am clear in my own mind. The Economic Secretary and I have taken lots of advice. Having an oath requires a wait for formal agreement. However, the requirements for the contract become immediate  and because many staff are already employed, they will transfer as the contract becomes enforceable.
I do not see the oath as comparable to the mechanism that I have put in place in the Bill, the employment contract. I do not want to do anything that will lead any individual to believe that what we propose is less powerful, and I am not prepared to give the hon. Gentleman an undertaking today that I will reconsider the answer—that may not be strong enough for him—but I am prepared to consider the matter again in discussion with the Economic Secretary. 
Let me be absolutely clear, as I do not want to mislead the hon. Gentleman; that may result in me not changing my mind. I am trying to be helpful to the hon. Gentleman. I do not want to say that I will go away and look at the matter, raising his expectations so he thinks that that really means that I will go away and add the oath. I am not prepared to give that undertaking. But I am prepared to say that I will consider looking at the Hansard report of exactly what the hon. Member for Sevenoaks said. I will look again at what I am doing and I will come back to the Committee. If that is not a strong enough undertaking, Opposition Members may want to press the amendment to a Division. If so, I ask my hon. Friends to oppose it. However, it would be better if the Committee agreed rather than had a vote on such an important issue.

John Burnett: I would just like to say that I have often debated with the Paymaster General, a person of great integrity who is held in high regard in the House. I shall await the result of her deliberations.

Michael Fallon: I suspect that that puts the onus back on me. I am grateful to the Paymaster General, who has listened to the debate. I am particularly grateful for her undertaking, which I fully understand comes with certain conditions. However, I do not see why we cannot have the new provision, providing the reinforcement that we are after. If I accept that that itself reinforces the oath, she may accept that there is some solemnity and some exceptional value to the statutory obligation. I hope that on that basis she will undertake to reflect further on the matter. I fully understand if she cannot commit herself to doing so. However, should she come to such a conclusion, of course she will understand that we may want to return to the matter at a later stage.

Andrew Tyrie: I thank the Paymaster General for being prepared to read Hansard and for agreeing to come back to us following her deliberations. I am very grateful for that.
Amendment agreed to. 
Amendments made: No. 90, in clause 17, page 7, line 38, at end insert 
'or [Disclosure to prosecuting authority],'. 
No. 91, in clause 17, page 7, line 39, leave out from 'civil' to end of line 40 and insert 
'proceedings (whether or not within the United Kingdom) relating to a matter in respect of which the Revenue and Customs have functions,'.—[Dawn Primarolo] 
Amendment proposed: No. 92, in clause 17, page 7, line 40, at end insert— 
'(ca) which is made for the purposes of a criminal investigation or criminal proceedings (whether or not within the United Kingdom) relating to matter in respect of which the Revenue and Customs have functions,'.—[Dawn Primarolo.] 
Question put, That the amendment be made:—
The Committee divided: Ayes 8, Noes 4.

Question accordingly agreed to 
Amendments made: No. 45, in clause 17, page 8, line 1, after 'Constabulary', insert 'or the Scottish inspectors'. 
No. 46, in clause 17, page 8, line 22, at end insert 
'and 
(d) a reference to the Scottish inspectors has the same meaning as in section 23.'. 
No. 83, in clause 17, page 8, line 22, at end insert 
'and 
(e) a reference to an enactment does not include— 
(i) an Act of the Scottish Parliament or an instrument made under such an Act, or 
(ii) an Act of the Northern Ireland Assembly or an instrument made under such an Act.'.—[Dawn Primarolo.] 
Clause 17, as amended, ordered to stand part of the Bill. 
Further consideration adjourned.—[Jim Fitzpatrick.] 
Adjourned accordingly at three minutes to Five o'clock till Thursday 13 January at twenty-five minutes past Nine o'clock.